Infinant, an embedded finance platform provider, announces today that it has sponsored a CCG Insights report. The report analyzes how banking-as-a-service (BaaS) is revolutionizing how financial products and services are delivered. CCG Insights, part of CCG Catalyst Consulting, specializes in banking and fintech, and brings a valuable perspective from the bankers viewpoint.
Last-mile delivery—the customer experience of the banking ecosystem— has quickly evolved with consumers and businesses having an array of engagement options that are often more tailored to their needs than traditional banking apps. As fintech and brand apps expanded, banks found early success outsourcing their charter to BaaS providers but have now been in the regulatory spotlight for the outsourcing approach.
Specifically, insufficient compliance oversight of their BaaS programs has led regulatory scrutiny to intensify, and over the last year, several sponsor banks have needed to graduate their strategy to a bank-controlled platform strategy.
Consequently, there has been a shift away from arrangements that obscure the bank-fintech relationship. Instead, banks are moving towards direct models that provide greater control, enabling banks to own their compliance and risk strategies while having direct relationships to fintech and brands to grow their programs at their desired pace.
The report “Reimagining the Last Mile in Banking” analyzes the BaaS evolution in three waves:
- Wave one: The foundations of BaaS and how it gained momentum, helped community banks diversify their revenue, and attracted fintech to build user-friendly front-end banking platforms for customers.
- Wave two: How BaaS increased its value as banks shifted their focus away from relying on traditional banking, consumer fintech companies, and interchange fees to providing value-added services to clients.
- Wave three: Looking at the numerous use cases of BaaS today, including embedded finance, the platform economy, and bank-owned marketplaces.
The development of the platform economy is ideal for banks as this evolution of BaaS means banks can capitalize on the recent digital transformation. This platform approach allows banks to distribute their product and service strengths across multiple distribution channels – securely connecting third-party apps and platforms that drive customers, deposits and loans.
“Embedded finance is quickly evolving, and it is a privilege to sponsor CCG’s research unraveling the benefits from the bank’s perspective,” states Chris Siemasko, Chief of Staff at Infinant, “We believe embedded finance represents a tremendous opportunity for banks to move to a platform economy and work directly with fintech and brands to accelerate their growth.”
Disclosure: This article mentions a client of an Espacio portfolio company.